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GoldenTree To Unload More Than $1Bln In High Yield

GoldenTree Asset Management is in the process of liquidating $1.2 billion in high-yield bonds as part of a broader strategy to focus on absolute return investing and exit the long-only separate accounts business.

Leon Wagner

GoldenTree Asset Management is in the process of liquidating $1.2 billion in high-yield bonds as part of a broader strategy to focus on absolute return investing and exit the long-only separate accounts business. Leon Wagner, chairman, said the firm plans to liquidate accounts benchmarked against a variety of indices, including ones from Credit Suisse First Boston and Merrill Lynch, during the next 90 days. Wagner declined to name specific credits the firm is looking to sell or to highlight its largest sector weightings. "We think high yield is richly priced and capacity constrained; it is incumbent to be able to use all of the tools [at a manager's disposal] such as the ability to short, use leverage and invest in non-index securities," stated Wagner. He added in the current low-volatility and tight-spread environment a long-only strategy can only produce limited returns. He noted GoldenTree has been defensive on high yield for some time and while the credit environment is benign, he expects volatility will likely return at some point.

GoldenTree currently has more than $6.5 billion in total assets under management and will maintain $3 billion in its existing debt opportunities absolute return business, which includes high-yield bonds, distressed debt and bank loans. Wagner noted he is not looking to ramp up assets for its absolute return product.

Additionally, GoldenTree is planning to open an office in London, has launched initiatives in the real estate arena and is considering starting a multi-strategy credit fund to incorporate all of its businesses. The London office would enable the firm to better take advantage of relative value plays when they arise in European assets, he explained. "Europe is very rich as well, but we have come to the conclusion that we want to be on the ground to take advantage of opportunities," said Wagner. He declined to further detail plans for the firm's London office and the potential multi-strategy fund, noting they are still in preliminary stages.

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